The Truth about Forex Fundamentals and Trading the News
This is a very good lesson. One of the most crucial aspects of trading is whether to trade the price action or the news. Here are my own views on this interesting topic that may be the main reason why you may fail in trading.
I get emails weekly from traders on topics about the variables of Forex fundamental and Forex news. They usually inquire if they should consider the news, which relates to their trading and the way they can use fundamental economic news variables in their trading. You should know that I believe that all fundamental variables affect the price action because I am a price trader. The reason I believe this is because the final result of participants and all catalysts is the price action. Catalyst is such as Forex news and other fundamental variables that cause markets to move and since analyzing the price bars on the “plain” price chart is price action trading, my concern is price movement that involves analyzing the end result.
Many fundamental traders and diehard economists will not agree with what I am saying. For clarity, I am not implying that news is not useful, or there is no money in fundamental trading. What I am saying is that price action, relevance, and effectiveness are indisputable. We as the price action traders, we want to remove economists, the so-called market gurus, and news in order to make our trading simple. In more, details.
Analyzing Forex fundamental variables more than necessary
Many traders end up confusing themselves, even seconding guessing themselves because of over-analyzing the news. Each day there are too many variables concerning the fundamentals and news, and you can not have enough time to use them effectively. The economic news that may influence the Forex market can literally burn your eyes if you try reading them each day. You should note that you can learn to read a plain vanilla chart and avoid all this unnecessary over-analyzing. It only makes sense to trade according to the final results of all economic news and Forex; price action. You will waste money paying to get access to the latest economic news.
It is like gambling when you predict the price movement based on the news
You cannot predict the course that the market will take according to the news. The market usually reacts contrary to what you expect based on the certain news because of the concern of selling the fact and buying the rumor. Price often moves in the opposite direction to what the effects of the news might be.
What is important to know about Forex News?
It is not important that you know everything about the fundamental forces that cause price movement, but you should know what are the most volatile news releases and the time they are released. This will help you not to lose profits because the markets had been alerted by a particular piece of news. Some of the news that you should pay close attention to include inflation, industrial production, interest rate decision, consumer surveys, business sentiment surveys, unemployment/employment, retail sales trade balances, manufacturing sector surveys and gross domestic product.
The actual news does not make the financial markets to move but the global economic variables do. You should be concerned with the final result of economic news events; price movement.